Hanoi Gunning For Southeast Asia’s Semiconductor Hub Position
Despite talk of Vietnam losing investors’ support from pulling back subsidies, Hanoi is clearly not backing down on its mission to be Southeast Asia’s semiconductor hub.
Vietnam is in the top 10 for semiconductor exports, with 6% annual growth projected until 2027. This is in spite of the government’s (Ministry of Planning and Investment) recent report revealed after Vietnam started applying the global minimum tax of 15% in January, many multinationals operating or planning to enter the country sought financial incentives since their profits would be affected, but did not receive it and relocated to other countries.
Austrian semiconductor firm AT&S planned to invest in Vietnam and even carried out a survey of the country, but eventually shifted to Malaysia as Vietnam did not offer incentives or had the required number of skilled workers. The Ministry added expansion of some big high-tech projects has gone to the back burner while waiting for the subsidy.
Yet, Manufacturing Asia reported Vietnam’s capital Hanoi is taking steps to achieve its goal to become a hub for semiconductor production by 2050. This lofty ambition is part of Vietnam’s National Master Plan for 2021-2030.
Vietnam envisions itself to become an upper-middle-income nation by 2030, buoyed by developments and investments in science, innovation, technology as well as digital transformation. Given the existing US-China trade tensions on top of the growing global demand for chips, Vietnam is poised to develop as a semiconductor manufacturing hub.
Vietnam is included in the top 10 in the world for the export of semiconductor devices and integrated circuits, with the industry predicted to grow at an annual rate of 6% until 2027. The country is also the third biggest semiconductor exporter to the US in 2023, reaching US$562 million up from US$321 million in 2022.
The Southeast Asian nation already has attracted several international semiconductor producers who have established operations such as Infineon Technologies AG, Amkor Technology Group, Samsung, Qualcomm, and Texas Instruments. Samsung had invested a total of US$22.4 billion into the country’s high-tech sector.
Hana Micron Vina has committed to invest US$1 billion to boost Vietnam’s chip production by 2025. Nvidia, one of the largest semiconductor producers in the world, targets setting up a base in Vietnam with the company already having invested US$250m in the Southeast Asian nation.
Minor Role
Vietnam’s contribution is considerably small when the entire supply chain is considered. The country mainly participates in the final stage of semiconductor production, focusing on assembly, testing, and packaging, and thus represents the lower value of the supply chain.
The lingering challenge for the country is to elevate itself in the supply chain by developing its design and packaging capabilities to have greater influence in the global semiconductor industry. Hanoi has distinct advantages that can position itself atop the semiconductor supply chain given that it is strategically located in the centre of the Red River delta.
The location is an important axis for political, economic, and scientific activities in Vietnam. Hanoi is also one of the leading localities for foreign direct investment (FDI). The city alone attracted US$1.7 billion in FDI in 2022, ranking it amongst the top seven destinations for FDI inflow in Vietnam.
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